My wife and I both have contributions to the retirement plans offered by our employers deducted from our paychecks.  In addition to those pre-tax retirement contributions, we also make monthly contributions to our Roth IRAs.

For me, the annual contribution limit to my Roth IRA is $5000.  (See IRS Publication 590 for complete information about contribution and income limits.)  My wife’s limit is the same.

The contribution time-table for both the Roth IRA and the Traditional IRA runs from January 1, 2009 until April 15, 2010.  That’s right.  We have until the tax-filing deadline of 2010 to make contributions to IRAs for 2009.

So, even if you haven’t made contributions for 2009, there’s still time.  We have six months to contribute as much as we can, up to our contribution limits.  Remember, once the deadline passes, we can’t go “back” and make contributions for the 2009 fiscal year. We’ll have to settle for making contributions for the 2010 fiscal year.

Between January 1 and April 15, there is an over-lap, and contributions can be made for both 2009 and 2010.  We indicate, using the memo line on our checks, the year for which we are making a contribution.

Follow me via Twitter

Only Six Months Left To Make Year 2009 Contributions To Roth IRA Or Traditional IRA

My oldest daughter is going into the fourth grade and my son is starting kindergarten.  They need school supplies!  Thankfully, Georgia’s 2009 Sales Tax Holiday begins next week.  I should be able to save a little money, buying school supplies and some clothing, sales tax free.

Several states offer Sales Tax Holidays, including the state where we live, Georgia.  (Click here to visit the Georgia Department of Revenue and read all about our 2009 Sales Tax Holiday.  If you live in another state, my man Jim over at Bargaineering has a comprehensive list of states that have sales tax holidays.)

According to the GADOR website -

Q. What merchandise qualifies for the exemption?

A. The sales tax exemption pertains to items in three categories:

Articles of Clothing. The exemption applies to articles of clothing and footwear with a sales price at time of purchase of $100 or less per item. There is no monetary limit on a purchase as long as the price of a single item does not exceed $100. Clothing accessories such as handbags, umbrellas, etc. are not exempt. See the lists of exempt and taxable items for more information.

Personal Computers. A single $1,500 or less purchase of a personal computer (PC) and/or related accessories is exempt. The exemption does not require the purchase of a “personal computer base unit” (tower, desktop, laptop) and is extended to peripheral devices such as modems, printers, speakers, non-recreational software, etc. If a single purchase exceeds the $1,500 maximum the entire purchase is taxable. A single purchase is considered the total of all sales made to a customer in one visit to a store. See the lists of exempt and taxable items for more information.

General School Supplies. The exemption applies to the purchase of general school supplies with a sales price at the time of purchase of $20 or less per item. There is no monetary limit on the purchase as long as the price of a single item does not exceed $20. See the lists of exempt and taxable items for more information.

Remember, while the holiday is designed to benefit families with school-age kids, anyone can buy the above mentioned items, and pay no sales tax.  Personally, I usually take advantage of the tax holiday and buy dress shirts.  I’ve noticed that one of our local department stores usually discounts there dress clothes during the holiday, and I like to stock up.  Last year, I purchased several really nice dress shirts for less than $7 per shirt.

If you own your own home business, a sales tax holiday might be a great time to buy a new computer, or to stock up on paper, staples, scissors, pencils, and other office supplies.  Just stay below the above mentioned price limits, and you could save a substantial amount of money.

That’s how I’m saving money this week – I’m taking advantage our a sales tax holiday. I will not have to pay state or local sales tax.  Sweet!

One note – If you go into debt, simply to take advantage of a sales tax holiday, you might be making a big mistake.  Remember, if you have to pay interest, you’ll be throwing away any advantage you might have derived from the holiday.  Personally, if I have to make the choice between using credit (and paying no tax) or waiting to pay cash (and pay some tax), I’m going to wait.  Never let a temporary sale or discount prevent you from making a well-thought-out-purchase!

Follow me via Twitter

How I Plan To Save Money Next Week – State Sales Tax Holiday

A few weeks ago, as I was searching the IRS website (for an unrelated publication), I stumbled across this PDF File, outlining the 2009 IRS Federal Income Tax Rate Schedules.  These rate schedules define various tax brackets.  It’s always good to have an idea of which tax bracket you are in, so that you can figure your effective tax rate.  Remember, your tax bracket and your effective tax rate are two entirely different things!

Single Filing

10% on income between $0 and $8,350
15% on income between $8,350 and $33,950; + $835
25% on income between $33,950 and $82,250; +$4,675
28% on income between $82,250 and $171,550; + $16,750
33% on income between $171,550 and $372,950; + $41,754
35% on income over $372,950; + $108,216

Head of Household Filing

10% on income between $0 and $11,950
15% on income between $11,950 and $45,500; + $1,195
25% on income between $45,500 and $117,450; + $6,227.50
28% on income between $117,450 and $190,200; + $24,215
33% on income between $190,200 and $372,950; + $44,585
35% on income over $372,950; + $104,892.50

Married Filing Jointly

10% on income between $0 and $16,700
15% on income between $16,700 and $67,900; + $1,670
25% on income between $67,900 and $137,050; + $9,350
28% on income between $137,050 and $208,850; + $26,637.50
33% on income between $208,850 and $372,950; + $46,741.50
35% on income over $372,950; + $100,894.50

Married Filing Separately

10% on income between $0 and $8,350
15% on income between $8,350 and $33,950; + $835
25% on income between $33,950 and $68,525; + $4,675
28% on income between $68,525 and $104,425; + $13,318.75
33% on income between $104,425 and $186,475; + $23,370.75
35% on income over $186,475; + $50,447.25

These rate schedules may come in handy, especially considering this news from Yahoo that millions of couples and retirees might have higher-than-expected tax bills come next April. Keep your tax rate in mind as you plan your retirement contributions and other tax-related financial decisions.

Follow me via Twitter

2009 IRS Federal Income Tax Schedules – Tax Brackets

I have just finished filing our 2008 income tax returns.  I managed to do a pretty good job estimating our withholding and quarterly prepayments.  We will receive a small refund from our federal return, and we only had to pay a very small amount in additional taxes to our state government.

Unlike last year, I did not make any contributions to my SEP-IRA.  I did so last year to reduce our tax liability.  This year, with an additional child in the family, and an additional child care credit, our liability was already slightly lower than the previous year, and I really do not have any “extra” cash sitting around for contributions.  Plus, with the current economic environment, I’d rather have a slightly larger cash reserve – and pay a little more tax on any interest that cash might earn – than to tie up more money in a retirement account.

As in previous year, I filed electronically, and directed the IRS to deposit my refund directly into my checking account.  For the payment to our state, I simply printed out a payment voucher (provided by my tax preparation software) and sent it, along with a check for payment amount, to our state’s department of revenue.

I printed two copies of each return, federal and state, and I also saved two digital copies.

Follow me via Twitter

Filed 2008 Federal And State Income Taxes

It’s that time, my friends.  It’s time to start working on my taxes.  I usually run the numbers through a couple of different online tax sites, and then file with which ever site charges the least to file.  This also gives me a chance to spot any errors or inconsistencies.

This will be the second year in a row where I have had to pay taxes on business income.  I’ll figure my taxes, as they stand today, and if there’s an opportunity to reduce them by contributing to my SEP-IRA, I shall do so.  Last year, I made a contribution to my SEP-IRA which significantly reduced my tax liability.

Our third child was born last April, so this year I’ll be able to claim another dependent.  This, too, should decrease our tax liability.

I’ll start inputting data this evening.  If it looks like I m  due a refund, which I doubt, I’ll go ahead and file.  If it looks like I am going to have to pay additional taxes, I’ll wait a few more weeks, and then I’ll file.  There’s no need for me to send Uncle Sam anymore money until I have to.  I might as well let it sit in our savings account for a couple of more weeks, earning a few more pennies in interest.

Follow me via Twitter

Time To Start Working On My Taxes

A friend recently asked me if I knew where she could read the 2009 Stimulus Bill – also known as the American Recovery and Reinvestment Act of 2009 – or H.R. 1.

After a little searching of one of my favorite sites, OpenCongress, I was able to locate the full text version of the bill.

I will warn you, reading then entire bill might take some time.  According to my computer, when I select print preview, the bill is more than 450 pages long.  I do not have enough ink in my printer to print out a 450 page document, nor do I have the inclination to keep a hard-copy record of this behemoth in my house.

It will be very interesting, over the course of the next several years, to observe the long-term impact of this single, mammoth bill.  Personally, I would like to see our country move in a different direction, towards a smaller, much more efficient government, but that ship, at least for the time being, has sailed.

Follow me via Twitter

Where Can I Read The 2009 Stimulus Bill?

The House and Senate continue to discuss the fate of a proposed economic stimulus package – the American Recovery and Reinvestment Bill of 2009.  Currently, the House version of the bill includes $825 Billion dollars worth of new spending and tax cuts.  The Senate version, as of yesterday, now has a price tag of $887 Billion dollars.

I’m trying to wrap my head around just how much $887 Billion dollars really is, and I’m not alone.  My pal Frugal Dad ran the numbers, and I strongly urge you to read his article about how long it would take to spend $887 Billion dollars, at a rate of $1 Million dollars per day.  Before you read his article, please be seated, because you might faint.

After reading Frugal Dad’s article, I grabbed my handy calculator, did a few Google searches, and I’ve come up with some pretty staggering numbers of my own.

According to the most recent estimates, there are 303 Million United States Citizens.  If the Senate version of the bill passes, the one that calls for $887 Billion dollars in new spending and tax cuts, that would equal $2,927 per United States Citizen.  This amount is in addition to all existing tax liabilities.

It looks like the bill, in some shape or form, is going to pass both houses of Congress and then be signed into law by President Obama.  Personally, my brain almost went numb as I read through this press release from the House Appropriations Committee.  I will not overwhelm you with details, but I strongly urge you to read the press release, which needed 13 pages just to summarize all of the new spending.

I would love to read your comments.  Are we moving in the right direction?  Do we have a choice?  Are there better alternatives?

Follow me via Twitter

American Recovery and Reinvestment Bill – $2,927 Per United States Citizen

I just logged in to my Orange Savings Account and noticed that my 2009 tax forms are now available for download.

From the ING Direct website:

You’ll receive a 1099 if you are…

The primary account holder of one or more deposit account(s) that earned in total $10 or more in interest in 2008. A deposit account is an Orange Savings Account, Orange CD or Electric Orange Checking. If you took a distribution from an IRA Savings or IRA CD in 2008, you’ll get a 1099-R.

You’ll receive a 1098 if you are…

The primary account holder of an Orange Mortgage or Orange Home Equity on which you paid interest during 2008.

I printed a copy of my 1099-INT and saved a copy to my hard drive.  I love the convenience of digital forms.

You can view your tax forms by logging into your account and clicking TAX FORMS.

I’m a big fan of ING Direct’s Orange Savings and Electric Orange accounts.  While there are other banks that offer slightly higher rates, I haven’t found one that could beat ING Direct’s customer service.  When away from the computer, I can call them, and within just a minute or two, a real-live-human will pick up the phone!  In this day and age, that attention to detail means a lot.

Follow me via Twitter

ING Direct Tax Forms Now Available

One of my personal finance heroes, and nationally syndicated talk show host, Dave Ramsey, has posted an alternative to the $700 Billion dollar bailout plan.

Click here to view Dave’s Three Steps To Change The Nation’s Future.

Dave has created a Common Sense Fix (PDF) for how to get out of the current crisis.  Here’s one suggestion that really caught my attention -

B. In order for a company to accept the government-backed insurance, they must do two things:

1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage.

a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes.

b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while
working with the borrower-again limiting foreclosures and ruined lives.

What do you think?  Is Dave on to something here?

Big thanks to Imelda for sending me the link to Dave’s plan.

Follow me via Twitter

Dave Ramsey’s Alternative To The Bailout

The House of Representative has voted against the $700 billion dollar bailout bill… for now.  207 members voted yea and 226 voted nae.  The bill, however isn’t dead, just yet.  The voting has remained opened, tabled for a time.

It’s amazing to see who is for and who is against the bill.  Personally, I never wanted the bill to pass, because I believe in small government, but I know others, who don’t mind government intervention, who oppose the bill for completely different reasons.

It’s going to be very interesting to see if a different version of the bill passes.

Later today, I’ll check the U.S. Congress Votes Database, over at the Washington Post, to see how my representatives voted.

Follow me via Twitter

House Votes Down Bailout Bill… For Now